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Landlords – Are you ready for the minimum energy standards?

minimum energy standardsThe Energy Act 2011 contains a number of provisions which will affect owners and occupiers of both residential and commercial property.  Possibly the most significant is the introduction of proposed minimum energy standards for properties that are let.

It is proposed from April 2018 there will be a requirement for properties rented out in the private sector, whether a commercial or residential property, to have a minimum energy performance rating of “E” on an Energy Performance Certificate (EPC).  This will mean it will be unlawful to let residential or commercial properties with an EPC rating of “F” or “G” (i.e. the lowest 2 grades of energy efficiency).

The regulations will initially apply to the granting of a new tenancy to a new or existing tenant.  From 1st April 2020, the regulations will apply to ALL privately rented property which are required to have an EPC.

This could have significant implications for landlords and property owners, including:

  • Increased difficulties in selling or letting a property with a low rating.
  • Valuations of such property could be affected if their marketability is diminished.
  • Rent reviews could be affected.
  • Property values falling where properties are less marketable.
  • Financing and lending options becoming restricted as lenders look to more sustainable options.

Properties most at risk of achieving a below “E” rating are generally older and unmodernised.  Having an old boiler, single glazing and very little insulation could result in a low rating. Some simple and relatively cheap and easy improvements include changing all the light bulbs for energy efficient ones and increasing roof insulation to at least 300mm or more in a domestic property.

There are exemptions; if landlords have carried out all cost-effective energy efficient improvements, if measures identified by Green Deal or an alternative government scheme are not cost effective, and if third-party consents are not available.

At Daniells Harrison we have recently been involved with the lease renewal negotiations on two commercial properties, where the risk that works will be required in 2020 to achieve an “E” rating have featured in the terms agreed.

Provision to the Valuer of the EPC for commercial properties is now required by many of the main Banks, and comment required in the valuation report as to the affect on the value of the property. It is seen as only a matter of time before this becomes a requirement in Buy-to-Let mortgage valuations for residential properties.

Owners and landlords of commercial and residential properties need to prepare themselves. They should attain a clear understanding of the energy efficiency of their property assets and assess the cost and viability of undertaking energy efficiency improvements to them.  A plan should be made to implement any necessary energy efficiency improvements before April 2018. That is not much more than a year away !!

Financial penalties for non-compliance is £5000 in the domestic sector.

If you are a landlord or property owner looking to sell, you need to ensure your property is as energy efficient as possible if you want to get the best rental or selling price. Daniells Harrison Chartered Surveyors provide valuations for both commercial and residential properties and will be mindful of the EPC as part of valuation process.   We are also able to provide residential EPCs in the Isle of Wight if required.

For more information on our commercial and residential valuation services or on energy efficiency regulations please contact the Isle of Wight office on 01983 821212 or via email